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Life Insurance · Component 1: Assess the client's needs and situation (35%)
How an agent works out how much life insurance a family needs: the fact-find, the capital needs and income replacement methods, inflation and return assumptions, existing group and individual coverage, and the CPP death, survivor's and children's benefits that offset the need. Component 1 carries 35% of the Life exam, and many of its items are calculations.
Assess the client's needs and situation4 min read7 sections
Needs analysis is the heaviest component of the Life exam (35%). Expect short client cases with a calculation: total the needs, subtract the resources, and choose the shortfall. Distractors are built from predictable slips: gross instead of net income, forgetting group coverage, simple instead of compound inflation, monthly figures not annualized.
| Method | What it does | Key formula |
|---|---|---|
| Capital needs | Adds lump-sum needs and the capital required to fund income, then nets off resources | Need = lump sums + income capital − savings − existing coverage − government lump sums |
| Income replacement | Replaces a share of the deceased's after-tax income for a period or forever | Perpetuity: income ÷ rate. Fixed term: PV of an ordinary annuity |
Lump-sum needs usually include final expenses and tax, debts, an emergency fund, education and legacy funds. Resources include savings, TFSAs passing to a spouse, existing individual and group coverage, pension lump sums and the CPP death benefit.
Every note. Every question. One pass.
5 more sections of this note are part of Premium.
From about C$8.25/mo on the Until-you-pass pass (12 months)